Novadaq Technologies, Inc. – Value Analysis (NASDAQ:NVDQ) : October 4, 2016

Capitalcube gives Novadaq Technologies, Inc. a score of 28.

Our analysis is based on comparing Novadaq Technologies, Inc. with the following peers – iCAD, Inc., Intuitive Surgical, Inc., Digirad Corporation, IRIDEX Corporation, General Electric Company, Royal Philips NV Sponsored ADR, CryoLife, Inc. and IMRIS Inc. (ICAD-US, ISRG-US, DRAD-US, IRIX-US, GE-US, PHG-US, CRY-US and IMRSQ-US).

Investment Outlook

Novadaq Technologies, Inc. has a fundamental score of 28 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • Novadaq Technologies Inc. currently trades at a higher Price/Book ratio (4.81) than its peer median (2.96).
  • NVDQ-US‘s earnings and EBITDA are both negative which suggest that P/E or Price/EBITDA are not meaningful to make this analysis between operating advantage (ROE) and growth expectations (as suggested by P/E or P/EBITDA).
  • NVDQ-US‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • NVDQ-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • Company appears to give away relatively high gross margins to relatively high operating costs suggesting a differentiated product portfolio with low pre-tax margins relative to peers.
  • NVDQ-US‘s earnings and EBITDA are both negative which suggest that P/E or Price/EBITDA are not meaningful for an analysis between historical growth (using annualized three-year revenue growth) and investor growth expectations (as suggested by P/E or Price/EBITDA) .
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • NVDQ-US‘s operating performance may not allow it to raise additional debt.

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Leverage & Liquidity

NVDQ-US would seem to have a hard time raising additional debt.

  • With debt at a relatively low 0.37% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 17.59%), and relatively tight interest coverage level of -372.16x, NVDQ-US would have a hard time raising much additional debt. Thus, the company is classified as having Limited Flexibility when it comes to raising more debt.
  • Of the 8 chosen peers for the company, only 6 of the stocks have an outstanding debt balance. Companies with no debt include ISRG-US and IRIX-US.

NVDQ-US has maintained its Constrained profile from the recent year-end.

  • NVDQ-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 999x in 2014.
  • The decrease in its interest coverage to -372.16x from -345.82x (in 2015) was also accompanied by a decrease in its peer median during this period to 2.67x from 4.11x.
  • Interest coverage fell 24.91 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • NVDQ-US‘s debt-EV continues to trend upward but is still within one standard deviation below its five-year average debt-EV of 1.54%.
  • Though its debt-EV has remained relatively stable at 0.37% compared to 2015, its peer median has increased to 17.59% from 1.57% during this period.
  • Relative to peers, debt-EV fell 15.97 percentage points.

Access the detailed analysis for Novadaq Technologies, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
iCAD, Inc. 0.68 1.74 -51.3 -358.2
Intuitive Surgical, Inc. 0 5.78 No interest exp 999
Digirad Corporation 20.57 1.22 4.35 35.42
IRIDEX Corporation 0 3.77 No interest exp 999
General Electric Company 39.99 1.44 1.96 5.01
Royal Philips NV Sponsored ADR 22.59 1.5 2.67 27.01
CryoLife, Inc. 17.59 4.4 12.21 28.98
IMRIS Inc. 33.29 1.1 -5.06 -107.04
Novadaq Technologies Inc. 0.37 7.18 -372.16 -1229.62
Peer Median 17.59 1.74 2.67 27.01
Best In Class 0.37 7.18 No interest exp 999

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Company Profile

Novadaq Technologies, Inc. develops, manufactures and markets real-time fluorescence imaging products. Its products are designed for use by surgeons in the operating room and other clinical settings where open, minimally invasive or interventional surgical procedures are performed. The company’s products include SPY imaging system, pinpoint endoscopic fluorescence imaging system, firefly system for robotic surgery and CO2 heart laser system. Its SPY Imaging core technology platform provides clinically relevant anatomic and physiologic images during a wide variety of complex surgical procedures without exposing the patient to radiation. Novadaq Technologies was founded by Rick Mangat on April 14, 2000 and is headquartered in Mississauga, Canada.

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